accounting chapter 1
Which of the following is an example of equity financing
A company raised $1 million by selling stocks to investors
Which of the following statements about the proprietorship form of business is true?
It generally receives favorable tax treatment relative to a corporation.
Which of the following is true of a partnership?
It is a common form of organization for service-type businesses.
Which of the following is true of a corporation?
It is owned by its stockholders.
Which of the following illustrates a way to use excess cash in investing activities
Purchase securities of other corporations
Which of the following statements is true regarding the Sarbanes-Oxley Act (SOX)?
The act has resulted in increased penalties for financial fraud by top management. The act calls for increased oversight responsibilities for boards of directors. The act is meant to decrease the likelihood of unethical corporate behavior.
Which of the following is NOT considered an asset of a company
dividends
Corporate stockholders generally ___ pay high taxes and have no personal liability.
do
The activities in the accounting process focus on identifying, recording, and communicating
economics
Salaries and Wages Expense is
expense
cost of advertising
expense
rent expense is a
expense
supplies expense is a
expense
Customers who want to know if a company will stay in business in the long term and honor warranties are considered ________ users of accounting information
external
Cash paid to stockholders
financing
Cash received from issuing stock
financing
You have been tasked with looking at the company's financial statements and determining what percentage of raises the employees should receive this year. Based on this, which department do you most likely work in?
human resources
Which internal user of accounting information would be most interested in information about pay raises that the company can offer its employees this year?
human resources director
Accounting is the information system that ________ the economic events of an organization so that users can make decisions
identifies, records, and communicates
When a company's revenues exceed their expenses, they record a net
income
Sales Revenue
income statement
cost of goods sold
income statement
income tax expense
income statement
interest expense
income statement
A local design company has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following would be considered disadvantages of forming a corporation
increased taxes difficulty in establishing a corporation accountability to stockholders
"Should we add capacity to our manufacturing plant to increase the volume of production?" would best represent a question a(n) ______ user of accounting information would ask
internal
should any retail locations be closed
internal
Forecasts of cash needs for the next year and financial comparisons of operating activities are examples of
internal reports that accounting provides to internal users
trying to determine whether the company complied with tax laws
internal revenue service
You are using a company's financial information to determine how much to increase the company's employees' wages and salaries. You are an example of a(n)
internal user
The Wine Cellar grows grapes and turns them into wine. They then store the wine until a customer purchases it. The Wine Cellar tracks the amount of wine they have in storage and records it as
inventory
trying to determine whether the company's net income will result in a stock price increase
investors in common stock
Which of the following external users of a company's financial documents will be MOST concerned about the wages the employees receive?
labor union
Bonds Payable
liability
If a company owes money to a bank, an investor, or another company, they will need to record
liability
accounts payable is a
liability
amounts owed to suppliers
liability
mortage payable is
liability
Which of the following would be most likely to need information about forecasts of cash needs for the next year
management
trying to determine whether an advertising proposal will be cost-effective
marketing managers
According to step 3 of solving ethical dilemmas, ethical dilemmas
may have more than one right solution
The partnership form of business organization is
often formed by individuals who bring different skills and resources to the business
Cash received from customers
operating
cash paid to suppliers
operating
A business that is owned jointly by two or more individuals but does not issue stock
partnership
Shared control, tax advantages, increased skills and resources
partnership
A company must have sufficient cash on hand to cover payments to creditors before it can
pay dividends to stockholders
amount earned from selling a product
revenue
sales revenue is a
revenue
service revenue is
revenue
A company that performs car maintenance for customers would record what type of revenue
service revenue
Which of the following are NOT characteristics of a corporation? Select all that apply
simple to set up and maintains control with founder best for retail and service-type businesses, controlled by founder shared control, tax advantages, increased skills and resources
Simple to set up and maintains control with owner
sole proprietorship
A party that invests in common stock
stockholder
What accounting information do creditors primarily look for when they read financial statements?
the credit worthiness of a company
A regulatory agency is an external user that needs to know if a company is operating within prescribed rules.
true
Which of the following questions would a creditor most likely ask
Will the company be able to pay its debts when they come due
Which of the following is a definition of a partnership?
a business owned by two or more persons who have specific duties and responsibilities
Which of the following is an example of an investing activity
a clothing manufacturing company purchasing a sewing machine
Obligations to suppliers of goods
accounts payable
Amounts due from customers
accounts receivable
Which of the following is required in order for a company to participate in investing activities
adequate amounts of cash
Accounts Receivable is a
asset
inventory is a
asset
land purchased
asset
equipment is a
assets
An expression about whether financial statements conform with generally accepted accounting principles
auditor
Accounts Receivable
balance sheet
accounts payable
balance sheet
common stock
balance sheet
equiptment
balance sheet
inventory
balance sheet
retained earnings
balance sheet
Accounting provides ________ to internal users
both forecasts of cash needs for the next year and financial comparisons
trying to determine whether the company should employ debt or equity financing
chief financial officer
Issuance of ownership shares
common stock
The portion of stockholders' equity that results from receiving cash from investors
common stock
A company publishes financial statements for various parties to review and reference. This is an example of which accounting process activity
communication
Dieter is meeting with company executives and forwards each of them a copy of the financial statements in preparation of their meeting. Dieter is engaged in the step of the accounting process
communication
A business that is organized as a separate legal entity owned by shareholders is a
corporation
A business that raises money by issuing shares of stock
corporation
Easier to transfer ownership and raise funds, no personal liability
corporation
Which of the following forms of business ownership is responsible for the majority of revenue produced in the United States?
corporation
A party to whom a business owes money
creditor
Jane gave money to a company with the specification that she would be repaid at the end of three months. Based on this information, Jane is an example of a(n)
creditor
trying to determine whether the company can pay its obligations
creditors
If a company raises $100,000 by selling bonds to investors, they are involved in
debt financing
Which of the following is NOT a step in analyzing ethics cases in financial reporting
Contact law enforcement regarding any violations of corporate ethics codes
What has resulted from the Sarbanes-Oxley Act (SOX)?
Management must certify the accuracy of financial information Penalties for fraudulent activities are much more severe